In Tuesday’s European session, silver price (XAG/USD) continues its downward trend, nearing the crucial support level of $29.00. The decline in the white metal is attributed to the strength of the US Dollar (USD) and bond yields, fueled by a significant reduction in market expectations for the Federal Reserve (Fed) to initiate interest rate cuts starting from the September meeting.
Factors Driving the Downward Pressure
Investors are increasingly convinced that the Fed will only lower its key borrowing rates once this year, as concerns about persistent price pressures intensify. The US Dollar Index (DXY) has stabilized after reaching a fresh four-week high near 105.40. Similarly, 10-year US Treasury yields, which have recovered strongly from 4.27% to 4.44% in the London session, contribute to the downward pressure on silver prices.
Key Events on the Horizon
The next significant catalysts for silver prices will be the release of the May United States Consumer Price Index (CPI) data and the Fed’s interest rate decision. The CPI data will offer insights into whether the disinflationary trend remains intact or has stalled. Recent reports indicated higher-than-expected price pressures in the first quarter, followed by an expected decline in April.
Meanwhile, the Fed is expected to maintain its current policy stance for the seventh consecutive time, as policymakers await further evidence of inflation returning to the desired rate of 2%. Market attention will be on the Fed’s dot plot, providing indications of policymakers’ outlook on the federal fund rate trajectory. The CME FedWatch tool suggests that 30-day Fed Fund Rate pricing data point to only one rate cut this year.
Conclusion
As silver prices approach a crucial support level amid a backdrop of a strong US Dollar and reduced rate cut expectations, investors are closely monitoring upcoming economic data releases and the Fed’s decision for further guidance on the metal’s trajectory. The outcome of these events will likely shape silver price movements in the near term.
